UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(
For the quarterly period ended
OR
For the transition period from to
(Exact name of registrant as specified in its charter) |
|
| |||
(State or other jurisdiction of incorporation or organization) | (Commission |
| (IRS Employer Identification No.) |
|
|
( |
Registrant’s telephone number, including area code |
Not Applicable |
(Former name or former address, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
| Trading |
| Name of each exchange on |
|
| |||
|
| |||
|
|
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of August 16, 2021,
PWP FORWARD ACQUISITION CORP. I
Form 10-Q/A
For the Quarter Ended June 30, 2021
References throughout this Amendment No. 1 to the Quarterly Report on Form 10-Q/A to “we,” “us,” the “Company” or “our company” are to PWP Forward Acquisition Corp. I, unless the context otherwise indicates.
This Amendment No. 1 (“Amendment No. 1”) to the Quarterly Report on Form 10-Q/A amends the Quarterly Report on Form 10-Q of PWP Forward Acquisition Corp. I as of and for the period ended June 30, 2021, as filed with the Securities and Exchange Commission (“SEC”) on August 16, 2021 (the “Q2 Form 10-Q”).
On August 16, 2021, PWP Forward Acquisition Corp. I (the “Company”) filed its Q2 Form 10-Q. Upon its initial public offering (“IPO”), the Company classified a portion of the Class A common stock as stockholders’ (“permanent”) equity to maintain net tangible assets greater than $5,000,000 on the basis that the Company will consummate its initial business combination only if the Company has net tangible assets of at least $5,000,001. In accordance with the SEC and its staff’s guidance on redeemable equity instructions, ASC 480, paragraph 10-S99, the Company’s management has re-evaluated its interpretation of the guidance and determined that the Class A common stock subject to redemption included certain provisions that require classification of the Class A common stock as temporary equity, regardless of the minimum net tangible assets required to complete the Company’s initial business combination. As a result, management has corrected the error by restating all Class A common stock subject to redemption as temporary equity. This has resulted in an adjustment to the initial carrying value of the Class A common stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and Class A common stock.
In connection with the change in presentation for the Class A common stock subject to possible redemption, the Company revised its earnings per share calculation to allocate income and losses shared pro rata between the two classes of shares.
The Company had previously determined that the changes were not qualitatively material to the Company’s issued financial statements and therefore, did not restate its financial statements. Instead, the Company revised its previously issued financial statements in Note 2 to its Quarterly Report on Form 10-Q for the period ended September 30, 2021, filed with the SEC on November 5, 2021. Although the qualitative factors supported a conclusion that the misstatements were not material, these factors were not strong enough to overcome the significant quantitative errors in the financial statements. Management has concluded that the misstatement was of such magnitude that it is probable that the judgment of a reasonable person relying upon the financial statements would have been influenced by the inclusion or correction of the foregoing items. As such, upon further consideration of the change, the Company determined the change in classification of the Class A common stock and change to its presentation of earnings per share is material and it should restate its previously issued financial statements.
Therefore, on December 13, 2021, the Company’s management and the audit committee of the Company’s board of directors (the “Audit Committee”) concluded that the unaudited interim financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021, filed with the SEC on August 16, 2021 (the “Affected Period”), should be restated to report all Class A common stock as temporary equity and should no longer be relied upon. As such, the Company will restate its financial statements for the Affected Period in this Quarterly Report on Form 10-Q/A.
The Company does not expect any of the above changes will have any impact on its cash position and cash held in the trust account established in connection with the IPO.
After re-evaluation, the Company’s management has concluded that in light of the errors described above, a material weakness existed in the Company’s internal control over financial reporting during the Affected Periods and that the Company’s disclosure controls and procedures were not effective. The Company’s remediation plan with respect to such material weakness is described in more detail in Item 4 of Part 1 of this Amendment No. 1.
PWP FORWARD ACQUISITION CORP. I
Form 10-Q/A
For the Quarter Ended June 30, 2021
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
PWP FORWARD ACQUISITION CORP. I
CONDENSED BALANCE SHEETS
| June 30, 2021 |
| December 31, 2020 | |||
(Unaudited) | ||||||
Assets: | (As Restated - See Note 2) | |||||
Current assets: | ||||||
Cash | $ | | $ | | ||
Prepaid expenses |
| |
| — | ||
Total current assets | | | ||||
Investments held in Trust Account |
| |
|
| ||
Deferred offering costs | — | | ||||
Total Assets | $ | | $ | | ||
Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Equity (Deficit): |
|
|
| |||
Current liabilities: | ||||||
Accounts payable | $ | | $ | | ||
Accrued expenses | | | ||||
Franchise tax payable | | | ||||
Notes payable- related party |
| — |
| | ||
Total current liabilities |
| |
| | ||
Deferred legal fees | | — | ||||
Derivative warrant liabilities | | — | ||||
Deferred underwriting commissions | | — | ||||
Total Liabilities | | | ||||
|
|
| ||||
Commitments and Contingencies |
|
|
| |||
Class A common stock, $ | | — | ||||
|
|
| ||||
Stockholders’ Equity (Deficit): |
|
|
| |||
Preferred stock, $ |
|
| ||||
Class A common stock, $ |
| — |
| — | ||
Class B common stock, $ |
| |
| | ||
Additional paid-in capital |
| — |
| | ||
Accumulated deficit |
| ( |
| ( | ||
Total stockholders' equity (deficit) |
| ( |
| | ||
Total Liabilities and Stockholders' Equity (Deficit) | $ | | $ | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
PWP FORWARD ACQUISITION CORP. I
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2021
(As Restated – See Note 2)
For the Three Months Ended | For the Six Months Ended | |||||
June 30, | June 30, | |||||
| 2021 |
| 2021 | |||
General and administrative expenses |
| $ | | $ | | |
General and administrative expenses - related party | | | ||||
Franchise tax expenses | | | ||||
Loss from operations | ( | ( | ||||
Other income (expense) | ||||||
Change in fair value of derivative warrant liabilities | | | ||||
Offering costs associated with derivative warrant liabilities | | ( | ||||
Income from investments held in Trust Account | | | ||||
Net income | $ | | $ | | ||
|
| |||||
Weighted average shares outstanding of Class A common stock, basic and diluted |
| |
| | ||
Basic and diluted net income per share, Class A common stock | | | ||||
Weighted average shares outstanding of Class B common stock, basic and diluted |
| |
| | ||
Basic and diluted net income per share, non-redeemable common stock | | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
PWP FORWARD ACQUISITION CORP. I
UNAUDITED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
For the Three and Six Months Ended June 30, 2021
(As Restated – See Note 2)
Common Stock | Retained Earnings | Total | |||||||||||||||||
Class A | Class B | Additional Paid-In | (Accumulated | Stockholders’ | |||||||||||||||
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit) |
| Equity | ||||||
Balance — December 31, 2020 | — | $ | — | | $ | | $ | | $ | ( | $ | | |||||||
Excess cash received over the fair value of the private warrants | — | — | — | — | | — | | ||||||||||||
Forfeiture of Class B common stock | — | — | ( | ( | — | — | |||||||||||||
Accretion of Class A common stock subject to possible redemption amount (Note 7) | — | — | — | — | ( | ( | ( | ||||||||||||
Net loss |
| — |
| — | — | — |
| — |
| ( |
| ( | |||||||
Balance — March 31, 2021 (unaudited) |
| — | $ | — | | $ | | $ | — | $ | ( | $ | ( | ||||||
Net income | — | — | — | — | — | | | ||||||||||||
Balance - June 30, 2021 (unaudited) | — | $ | — | | $ | | $ | — | $ | ( | $ | ( |
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
PWP FORWARD ACQUISITION CORP. I
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
For the Six Months Ended June 30, 2021
(As Restated – See Note 2)
Cash Flows from Operating Activities: |
|
| |
Net income | $ | | |
Adjustments to reconcile net income to net cash used in operating activities: |
|
| |
Offering costs associated with derivative warrant liabilities | | ||
Change in fair value of derivative warrant liabilities | ( | ||
Income from investments held in Trust Account | ( | ||
Changes in operating assets and liabilities: |
|
| |
Prepaid expenses | ( | ||
Accounts payable |
| ( | |
Franchise tax payable | | ||
Deferred legal fees | | ||
Net cash used in operating activities |
| ( | |
Cash Flows from Investing Activities: | |||
Cash deposited in Trust Account | ( | ||
Net cash used in investing activities | ( | ||
|
| ||
Cash Flows from Financing Activities: |
|
| |
Repayment of note payable to related party | ( | ||
Proceeds received from initial public offering, gross | | ||
Proceeds received from private placement |
| | |
Reimbursement from underwriter |
| | |
Offering costs paid |
| ( | |
Net cash provided by financing activities |
| | |
| |||
Net increase in cash |
| ||
Cash — beginning of the period |
| ||
Cash — end of the period | $ | | |
|
| ||
Supplemental disclosure of non-cash activities: |
| ||
Offering costs included in accounts payable | $ | | |
Offering costs included in accrued expenses | $ | | |
Reversal of accrued expenses | $ | | |
Reclassification of outstanding accounts payable to deferred legal fees | $ | | |
Deferred legal fees in connection with the initial public offering | $ | | |
Deferred underwriting commissions | $ | |
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
PWP FORWARD ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(As Restated)
Note 1 — Description of Organization and Business Operations
PWP Forward Acquisition Corp. I (the “Company”) is a blank check company incorporated in Delaware on September 9, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). The Company is an emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.
As of June 30, 2021, the Company had not commenced any operations. All activity for the period from September 9, 2020 (inception) through June 30, 2021 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”) described below and the search for a target business. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Initial Public Offering.
The Company has selected December 31 as its fiscal year end.
The Company’s sponsor is PWP Forward Sponsor I LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective March 9, 2021. On March 12, 2021, the Company consummated its Initial Public Offering of
Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of
Upon the closing of the Initial Public Offering and the Private Placement, $
5
PWP FORWARD ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(As Restated)
The Company’s management has broad discretion with respect to the specific application of the net proceeds from the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete
The Company will provide the holders of the Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then held in the Trust Account (initially at $
The Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of
The holders of the Founder Shares (the “initial stockholders”) agreed not to propose an amendment to the Certificate of Incorporation (A) to modify the substance or timing of the Company’s obligation to allow redemption in connection with a Business Combination or to redeem
6
PWP FORWARD ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(As Restated)
If the Company is unable to complete a Business Combination within
The initial stockholders agreed to waive their rights to liquidating distributions from the Trust Account with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the initial stockholders acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters agreed to waive their rights to the deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $
Liquidity and Capital Resources
As of June 30, 2021, the Company had approximately $
Prior to the completion of the Initial Public Offering, the Company’s liquidity needs were satisfied through the payment by the Company’s Sponsor of $
7
PWP FORWARD ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(As Restated)
Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business Combination or
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 global pandemic and has concluded that although it is reasonably possible that the pandemic could have a negative effect on the Company’s financial position, results of its operations, and/or search for a target company, the specific impact is not readily determinable as of the date of the financial statements. Accordingly, the financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 2 - Restatement of Previously Reported Financial Statements
The Company had previously classified a portion of its Class A common stock in stockholders’ (“permanent”) equity. Although the Company did not specify a maximum redemption threshold, its charter currently provides that the Company will not redeem its Public Shares in an amount that would cause its net tangible assets to be less than $
In accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the corrections and has determined that the related impact was material to the previously filed financial statements that contained the error, reported in the Company’s Form 10-Q for the quarterly period ended June 30, 2021 (the “Affected Quarterly Period”). Therefore, the Company, in consultation with its Audit Committee, concluded that the Affected Quarterly Period should be restated to present all Class A common stock subject to possible redemption as temporary equity, to recognize accretion from the initial book value to redemption value at the time of its Initial Public Offering, and to correct the presentation of earnings per share.
The impact of the restatements on the financial statements for the Affected Quarterly Period is presented below.
8
PWP FORWARD ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(As Restated)
The table below presents the effect of the restatement discussed above to the Company’s previously reported balance sheet as of June 30, 2021:
As of June 30, 2021 (unaudited) |
| As Reported |
| Adjustment |
| As Restated | |||
Total assets | $ | |
| — | $ | | |||
Total libilities | $ | |
| — | $ | | |||
Class A common stock subject to possible redemp |
| |
| |
| | |||
Preferred stock |
| — |
| — |
| — | |||
Class A common stock |
| |
| ( |
| — | |||
Class B common stock |
| |
| — |
| | |||
Additional paid-in capital |
| |
| ( |
| — | |||
Retained eamings (accumulated deficit) |
| |
| ( |
| ( | |||
Total stockholders’ equity (deficit) | $ | | $ | ( | $ | ( | |||
Total Liabilities, Class A Common Stock Subject to Possible-Redemption and Stockholders’ Equity (Deficit) | $ | | $ | — | $ | | |||
Class A common stock subject to possible redemption |
| |
| |
| | |||
Class A common stock |
| |
| ( |
| — |
The Company’s statement of stockholders’ equity (deficit) has been restated to reflect the changes to the impacted stockholders’ equity accounts described above.
The table below presents the effect of the restatement discussed above to the Company’s previously reported statement of cash flows for the six months ended June 30, 2021:
For the six months ended June 30, 2021 (unaudited) | |||||||||
| As Reported |
| Adjustment |
| As Restated | ||||
Cash Flows from Operating Activities | $ | ( | $ | — | $ | ( | |||
Cash Flows from Investing Activities | $ | ( | $ | — | $ | ( | |||
Cash Flows from Financing Activities | $ | | $ | — | $ | | |||
Supplemental disclosure of non-cash activities: |
|
| |||||||
Offering costs included in accounts payable | $ | | $ | — | $ | | |||
Offering costs included in accrued expenses | $ | | $ | — | $ | | |||
Reversal of accrued expenses | $ | | $ | — | $ | | |||
Reclassification of outstanding accounts payable to deferred legal fees | $ | | $ | — | $ | | |||
Deferred legal fees in connection with the initial public offering | $ | | $ | — | $ | | |||
Deferred underwriting commissions | $ | | $ | — | $ | | |||
Initial value of Class A common stock subject to possible redemption | $ | | $ | ( | $ | — | |||
Change in value of Class A common stock subject to possible redemption | $ | | $ | ( | $ | — |
9
PWP FORWARD ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(As Restated)
The impact to the reported amounts of weighted average shares outstanding and basic and diluted earnings per share is presented below for the Affected Quarterly Period:
Earnings Per Share for Class A common stock | |||||||||
| As Reported |
| Adjustment |
| As Adjusted | ||||
Form 10-Q (June 30, 2021) - Three months ended June 30, 2021 |
|
|
|
|
|
| |||
Net income | $ | | $ | — | $ | | |||
Weighted average shares outstanding |
| |
| |
| | |||
Basic and diluted earnings per share | $ | — | | | |||||
Form 10-Q (June 30, 2021) - Six Months Ended June 30, 2021 |
|
|
|
|
|
| |||
Net income | $ | | $ | — | $ | | |||
Weighted average shares outstanding |
| |
| ( |
| | |||
Basic and diluted earnings per share | $ | — | | |
Earnings Per Share for Class B common stock | |||||||||
| As Reported |
| Adjustment |
| As Adjusted | ||||
Form 10-Q (June 30, 2021) - Three months ended June 30, 2021 |
|
|
|
|
|
| |||
Net income | $ | | $ | — | $ | | |||
Weighted average shares outstanding |
| |
| ( |
| | |||
Basic and diluted earnings per share | | ( | | ||||||
Form 10-Q (June 30, 2021) - Six Months Ended June 30, 2021 | |||||||||
Net income | $ | | $ | — | $ | | |||
Weighted average shares outstanding |
| |
| ( |
| | |||
Basic and diluted earnings per share | | ( | |
Note 3 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Operating results for the period for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected through December 31, 2021.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial
10
PWP FORWARD ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(As Restated)
accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable.
The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had
Investments Held in Trust Account
The Company’s portfolio of investments is comprised solely of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities, or a combination thereof. The Company's investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in income from investments held in Trust Account in the accompanying unaudited condensed statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under FASB ASC Topic 820, “Fair Value Measurements” approximates the carrying amounts represented in the balance sheets.
Fair Value Measurements
Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
● | Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
11
PWP FORWARD ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(As Restated)
● | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
● | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.
Derivative Warrant Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The
Offering Costs Associated with the Initial Public Offering
Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs were allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with derivative warrant liabilities were expensed as incurred and presented as non-operating expenses in the condensed statements of operations. Upon the completion of the Initial Public Offering, costs associated with the issuance of Class A common stock were charged against the carrying value of the Class A shares. In connection with the reclassification of Class A common stock to temporary equity (see Note 7), the offering costs were reclassified to accumulated deficit in the condensed statement of changes in stockholders’ equity (deficit). The Company classifies deferred underwriting commissions as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC 480. Class A common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable Class A common stock (including shares of Class A common stock that feature redemption rights that are
12
PWP FORWARD ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(As Restated)
either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, Class A common stock is classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of June 30, 2021, 21,163,433 shares of Class A common stock subject to possible redemption are presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
Effective with the closing of the Initial Public Offering (including exercise of the over-allotment option), the Company recognized the accretion from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under FASB ASC Topic 740, “Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were
Net Income (Loss) Per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per common share is calculated by dividing the net income (loss) by the weighted average shares of common stock outstanding for the respective period.
The calculation of diluted net income (loss) per common stock does not consider the effect of the warrants issued in connection with the Initial Public Offering (including exercise of the over-allotment option) and the Private Placement to purchase an aggregate of
13
PWP FORWARD ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(As Restated)
The following table presents a reconciliation of the numerator and denominator used to compute basic and diluted net income (loss) per share for each class of common stock:
For the Three Months Ended | For the Six Months Ended | |||||||||||
June 30, 2021 | June 30, 2021 | |||||||||||
| Class A |
| Class B |
| Class A |
| Class B | |||||
Basic and diluted net income (loss) per common stock: | ||||||||||||
Numerator: | ||||||||||||
Allocation of net income | $ | | $ | | $ | | $ | | ||||
Denominator: | ||||||||||||
Basic and diluted weighted average common stock outstanding | | | | | ||||||||
Basic and diluted net income per common stock | | | | |
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statement.
Note 4 - Initial Public Offering
On March 12, 2021, the Company consummated its Initial Public Offering of
Each Unit consists of
Note 5 - Related Party Transactions
Founder Shares
On October 6, 2020, the Sponsor paid $
14
PWP FORWARD ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(As Restated)
The initial stockholders agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A)
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of
Each Private Placement Warrant is exercisable for
The purchasers of the Private Placement Warrants agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants (except to permitted transferees) until
Related Party Loans
On October 6, 2020, the Sponsor agreed to loan the Company an aggregate of up to $
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination or, at the lenders’ discretion, up to $
Administrative Services Agreement
Commencing on the date that the Company’s securities were first listed on the Nasdaq through the earlier of consummation of the initial Business Combination and the Company’s liquidation, the Company agreed to pay an entity related to the Sponsor a total of $
15
PWP FORWARD ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(As Restated)
per month for office space, administrative and support services. During the three and six months ended June 30, 2021 the Company incurred $
The Sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the Company’s behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations. The Company’s audit committee will review on a quarterly basis all payments that were made by us to the Sponsor, directors, officers or the Company’s or any of their affiliates.
Note 6 - Commitments and Contingencies
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any (and any shares of common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares), are entitled to registration rights pursuant to a registration rights agreement signed upon the consummation of the Initial Public Offering. These holders are entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides that the Company would not be required to effect or permit any registration or cause any registration statement to become effective until termination of the applicable lock-up period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a
The underwriters were entitled to an underwriting discount of $
In connection with the closing of the Over-Allotment on March 18, 2021, the underwriters were entitled to an additional fee of approximately $
Deferred Legal Fees
The Company engaged a legal counsel firm for legal advisory services, and the legal counsel agreed to defer a portion of their fees (“Deferred Legal Fees”). The deferred fee will become payable in the event that the Company completes a Business Combination. As of June 30, 2021, the Company has deferred legal fees of approximately $
Note 7 - Class A Common Stock Subject to Possible Redemption
The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. The Company is authorized to issue
16
PWP FORWARD ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(As Restated)
The Class A common stock subject to possible redemption reflected on the condensed balance sheet is reconciled in the following table:
Gross proceeds from Initial Public Offering |
| $ | |
Less: |
|
| |
Fair value of Public Warrants at issuance |
| ( | |
Offering costs allocated to Class A common stock subject to possible redemption |
| ( | |
Plus: |
|
| |
Accretion on Class A common stock subject to possible redemption amount |
| | |
Class A common stock subject to possible redemption | $ | |
Note 8 — Stockholders’ Equity
Preferred Stock — The Company is authorized to issue
Class A Common Stock — The Company is authorized to issue
Class B Common Stock — The Company is authorized to issue
Common stockholders of record are entitled to
The Class B common stock will automatically convert into Class A common stock at the time of the initial Business Combination, or earlier at the option of the holder, on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein. In the event that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the Initial Public Offering and related to the closing of the initial Business Combination, the ratio at which the shares of Class B common stock will convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the issued and outstanding shares of the Class B common stock agree to waive such anti-dilution adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis,
17
PWP FORWARD ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(As Restated)
Note 9 — Warrants
As of June 30, 2021, the Company had
Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a)
The warrants have an exercise price of $
The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until
18
PWP FORWARD ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(As Restated)
Redemption of warrants when the price per share of Class A common stock equals or exceeds $
Once the warrants become exercisable, the Company may call the outstanding warrants for redemption (except as described herein with respect to the Private Placement Warrants):
● | in whole and not in part; |
● | at a price of $ |
● | upon a minimum of |
● | if, and only if, the last reported sale price of Class A common stock for any |
The Company will not redeem the warrants as described above unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A common stock is available throughout the
redemption period. If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.Redemption of warrants when the price per share of Class A common stock equals or exceeds $
Once the warrants become exercisable, the Company may redeem the outstanding warrants:
● | in whole and not in part; |
● | at $ |
● | if, and only if, the Reference Value equals or exceeds $ |
● | if the Reference Value is less than $ |
The “fair market value” of Class A common stock shall mean the volume weighted average price of Class A common stock during the
In no event will the Company be required to net cash settle any warrant. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
19
PWP FORWARD ACQUISITION CORP. I
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(As Restated)
Note 10 — Fair Value Measurements
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
|
| Quoted Prices in |
| Significant Other |
| Significant Other | |||
Active Markets | Observable Inputs | Unobservable Inputs | |||||||
Description | (Level 1) | (Level 2) | (Level 3) | ||||||
Assets: | |||||||||
Investments held in Trust Account - Money market fund |
| ||||||||
$ | | $ | — | $ | — | ||||
Liabilities: | |||||||||
Derivative warrant liabilities - Public warrants | $ | | $ | — | $ | — | |||
Derivative warrant liabilities - Private placement warrants | $ | — | $ | | $ | — |
Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. The estimated fair value of the Public Warrants was transferred from a Level 3 measurement to a Level 1 measurement in May 2021, when the Public Warrants were separately listed and traded in an active market. The estimated fair value of the Private Placement Warrants was transferred from a Level 3 measurement to a Level 2 measurement in May 2021, as all of the significant inputs to the valuation model used to estimate the fair value of the Private Placement Warrants became directly or indirectly observable from the listed Public Warrants.
The Company utilized a binomial / lattice model to estimate the fair value of the Public Warrants and Private Placement Warrants at issuance and at March 31, 2021. Beginning in May 2021 the listed price of the Public Warrants is used to estimate fair value of the Public Warrants and the significant inputs to the valuation model used to estimate the fair value of the Private Placement Warrants became directly or indirectly observable from the listed Public Warrants. For the three and six months ended June 30, 2021, the Company recognized a gain resulting from changes in the fair value of derivative warrant liabilities of approximately $
The change in the fair value of Level 3 derivative warrant liabilities for the six months ended June 30, 2021 is summarized as follows:
Level 3 - Derivative warrant liabilities at March 12, 2021 (inception) | $ | | |
Issuance of Public and Private Warrants | | ||
Change in fair value of derivative warrant liabilities | | ||
Level 3 - Derivative warrant liabilities at March 31, 2021 |
| | |
Transfer of Public Warrants to Level 1 |
| ( | |
Transfer of Private Placement Warrants to Level 2 |
| ( | |
Derivative warrant liabilities at June 30, 2021 | $ | |
Note 11 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred up to the date unaudited condensed financial statements were available to be issued. Based upon this review, the Company determined that, except as disclosed in Note 2, there have been no events that have occurred that would require adjustments to the disclosures in the unaudited condensed financial statements.
20
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References to the “Company,” “PWP Forward Acquisition Corp. I,” “PWP Forward Acquisition,” “our,” “us” or “we” refer to PWP Forward Acquisition Corp. I. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim condensed financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q/A includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings.
Overview
We are a blank check company incorporated in Delaware on September 9, 2020. We were formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies.
Our sponsor is PWP Forward Sponsor I LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for our Initial Public Offering was declared effective March 9, 2021. On March 12, 2021, we consummated our Initial Public Offering of 20,000,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $200.0 million, and incurring offering costs of approximately $11.9 million, of which $7.0 million and approximately $378,000 was for deferred underwriting commissions and deferred legal fees, respectively. On March 18, 2021, the underwriters partially exercised the over-allotment option and purchased an additional 1,163,433 Units (the “Over-Allotment Units”) and forfeited the remainder of the option, generating gross proceeds of approximately $11.6 million, and incurring additional offering costs of approximately $640,000, of which approximately $407,000 was for deferred underwriting fees (the “Over-Allotment”).
Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 4,000,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”), at a price of $1.50 per Private Placement Warrant with the Sponsor, generating gross proceeds of $6.0 million. Simultaneously with the closing of the Over-Allotment on March 18, 2021, we consummated the second closing of the Private Placement, resulting in the purchase of an aggregate of an additional 155,124 Private Placement Warrants by the Sponsor, generating gross proceeds to us of approximately $233,000.
Upon the closing of the Initial Public Offering and the Private Placement, $200.0 million ($10.00 per Unit) of the net proceeds from the sale of the Units in the Initial Public Offering and the Private Placement were placed in a trust account (“Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and have been, and will continue to be, invested only in U.S. “government securities,” within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act, which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below. In connection with the closing of the Over-Allotment on March 18, 2021, an aggregate of approximately $11.6 million of the net proceeds from the sale of the Over-Allotment Units and the additional Private Placement were placed in the Trust Account, for a total amount of approximately $211.6 million.
21
The Company’s management has broad discretion with respect to the specific application of the net proceeds from the Initial Public Offering and the sale of Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that we will be able to complete a Business Combination successfully. We must complete one or more initial Business Combinations having an aggregate fair market value of at least 80% of the net assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the income earned on the Trust Account) at the time of the agreement to enter into the initial Business Combination. However, we only intend to complete a Business Combination if the post-transaction company owns or acquires 50% or more of the issued and outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
If we are unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or March 12, 2023 (the “Combination Period”) and our stockholders have not amended the Certificate of Incorporation to extend such Combination Period, we will (1) cease all operations except for the purpose of winding up; (2) as promptly as reasonably possible but not more than 10 business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (less up to $100,000 of interest to pay dissolution expenses and which interest shall be net of taxes payable), divided by the number of then issued and outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any); and (3) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and our board of directors, liquidate and dissolve, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
On April 29, 2021, the Company announced that, commencing on April 30, 2021, the holders of the Company’s Units may elect to separately trade the shares of Class A Common Stock and Public Warrants. Any Units not separated continue to trade on Nasdaq under the symbol “FRWAU.” Any underlying shares of Class A Common Stock and Public Warrants that were separated trade on Nasdaq under the symbols “FRW” and “FRWAW,” respectively. No fractional warrants were issued upon separation of the Units and only whole warrants trade.
Liquidity and Capital Resources
As of June 30, 2021, we had approximately $1.0 million in our operating bank account, and working capital of approximately $1.2 million (not taking into consideration approximately $98,000 of franchise tax obligations that may be paid using investment income earned from the Trust Account).
Prior to the completion of the Initial Public Offering, our liquidity needs were satisfied through the payment by our Sponsor of $25,000 for certain offering costs on our behalf in exchange for the issuance of the Founder Shares, and loans proceeds from our Sponsor of $300,000. The loan was repaid in full with the proceeds from the Initial Public Offering and Private Placement. Subsequent to the consummation of the Initial Public Offering and Private Placement, our liquidity needs were satisfied with the proceeds from the consummation of the Private Placement not held in the Trust Account. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor may, but is not obligated to, provide the Company Working Capital Loans (as defined below). To date, there were no amounts outstanding under any Working Capital Loans.
Based on the foregoing, we believe that we will have sufficient working capital and borrowing capacity to meet our needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we will use the funds held outside of the Trust Account for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that although it is reasonably possible that the pandemic could have a negative effect on our financial position, results of our operations and/or search for a target company, the specific impact is not readily determinable as of the date of the financial statements. Accordingly, the financial statements do not include any adjustments that might result from the outcome of this uncertainty.
22
Results of Operations
Our entire activity since inception up to June 30, 2021 relates to preparation for our formation and the Initial Public Offering and the search for a target business. We will not be generating any operating revenues until the closing and completion of our initial Business Combination, at the earliest.
For the three months ended June 30, 2021, we had net income of approximately $1.8 million, which consisted of a gain of approximately $2.6 million resulting from the change in fair value of derivative warrant liabilities and income from investments held in Trust Account of approximately $3,000, which was partially offset by a loss from operations of approximately $806,000. The loss from operations consisted of approximately $726,000 general and administrative expenses, $30,000 of general and administrative expenses - related party, and approximately $50,000 in franchise tax expense.
For the six months ended June 30, 2021, we had net income of approximately $1.1 million, which consisted of a gain of approximately $2.6 million resulting from the change in fair value of derivative warrant liabilities and income from investments held in Trust Account of approximately $4,000, which was partially offset by a loss from operations of approximately $1.1 million and non-operating expenses of approximately $397,000 for offering costs associated with derivative warrant liabilities. The loss from operations consisted of approximately $977,000 general and administrative expenses, $40,000 of general and administrative expenses - related party, and approximately $98,000 in franchise tax expense.
Contractual Obligations
Administrative Services Agreement
Commencing on the date that our securities were first listed on the Nasdaq through the earlier of consummation of the initial Business Combination or our liquidation, we agreed to pay an entity related to the Sponsor a total of $10,000 per month for office space, administrative and support services.
We incurred approximately $30,000 and $40,000 in general and administrative expenses-related party in the accompanying unaudited condensed statements of operations for the three and six months ended June 30, 2021, respectively.
The Sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations. Our audit committee will review on a quarterly basis all payments that were made by us to the Sponsor, directors, officers or us or any of their affiliates.
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any (and any shares of common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares), are entitled to registration rights pursuant to a registration rights agreement signed upon the consummation of the Initial Public Offering. These holders are entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides that we would not be required to effect or permit any registration or cause any registration statement to become effective until termination of the applicable lock-up period. We will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
We granted the underwriters a 45-day option from the date of the final prospectus relating to the Initial Public Offering to purchase up to 3,000,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price, less underwriting discounts and commissions. On March 16, 2021, the underwriters partially exercised the over-allotment option and purchased an additional 1,163,433 Units and forfeited the remainder of the option.
23
The underwriters were entitled to an underwriting discount of $0.20 per Unit, or $4.0 million in the aggregate, paid upon the closing of the Initial Public Offering. An additional fee of $0.35 per Unit, or $7.0 million in the aggregate will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.
In connection with the closing of the Over-Allotment on March 18, 2021, the underwriters were entitled to an additional fee of approximately $233,000 paid upon closing, and approximately $407,000 in deferred underwriting commissions.
Critical Accounting Policies
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The 4,232,686 warrants issued in connection with the Initial Public Offering and exercise of the over-allotment (the “Public Warrants”) and the 4,155,124 Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statements of operations. The Public Warrants and the Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the carrying value of the instruments to fair value at each reporting period until they are exercised. The initial fair value of the Public Warrants issued in connection with the Public Offering and the fair value of the Private Placement Warrants have been estimated using a binomial / lattice model that assumed optimal exercise of the Company’s redemption option, including the make-whole table, per the warrant agreement, at the earliest possible date. As the transfer of Private Placement Warrants to anyone who is not a permitted transferee would result in the Private Placement Warrants having substantially the same terms as the Public Warrants, the Company determined that the fair value of each Private Placement Warrant is equivalent to that of each Public Warrant. The fair value of the Public Warrants and Private Placement Warrants as of June 30, 2021 is based on observable listed prices for such warrants. The Private Placement Warrants have the same value as the Public Warrants since they are also subject to the make-whole table, per the warrant agreement. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.
Class A common shares subject to possible redemption
We account for our Class A common stock subject to possible redemption in accordance with the guidance in ASC 480. Class A common stock subject to mandatory redemption (if any) is classified as a liability instrument and is measured at fair value. Conditionally redeemable Class A common stock (including shares of Class A common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, Class A common stock is classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of June 30, 2021, 21,163,433 shares of Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.
Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion in carrying value of redeemable shares from initial book value to redemption amount. The change in carrying value of redeemable shares resulted in charges against additional paid-in capital and credits to accumulated deficit in connection with the reclassification of Class A common stock to temporary equity.
24
Net income (loss) per common shares
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per common share is calculated by dividing the net income (loss) by the weighted average shares of common stock outstanding for the respective period.
The calculation of diluted net income (loss) per common stock does not consider the effect of the warrants underlying the Units sold in the Initial Public Offering (including exercise of the over-allotment option) and the Private Placement to purchase an aggregate of 21,163,433 shares of Class A common stock in the calculation of diluted income (loss) per share, because their exercise is contingent upon future events and their inclusion would be anti-dilutive under the treasury stock method. As a result, diluted net income (loss) per share is the same as basic net income (loss) per share for the three and six months ended June 30, 2021. Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. We adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact our financial position, results of operations or cash flows.
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited condensed financial statements.
Off-Balance Sheet Arrangements
As of June 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an “emerging growth company,” whichever is earlier.
25
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item. As of June 30, 2021, we were not subject to any market or interest rate risk. The net proceeds of the Initial Public Offering, including amounts in the Trust Account, will be invested in U.S. government securities with a maturity of 185 days or less or in money market funds that meet certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended, that invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
We have not engaged in any hedging activities since our inception and we do not expect to engage in any hedging activities with respect to the market risk to which we are exposed.
Item 4. | Controls and Procedures (as restated) |
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer/Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended June 30, 2021, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, we have concluded that during the period covered by this report, our disclosure controls and procedures were not effective as of June 30, 2021, due to a material weakness in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, the Company’s management has concluded that the Company's internal control around the interpretation and accounting for certain complex equity and equity-linked instruments issued by the Company was not effectively designed or maintained. This material weakness resulted in the restatement of the Company’s interim financial statements for the quarter ended June 30, 2021. Additionally, this material weakness could result in a misstatement of the carrying value of equity, equity-linked instruments and related accounts and disclosures of the financial statements that would not be prevented or detected on a timely basis. As a result, our management performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with generally accepted principles in the United States of America. Accordingly, management believes that the financial statements included in this Form 10-Q/A present fairly, in all material respects, the Company's financial position, result of operations and cash flows of the periods presented.
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2021 covered by this Quarterly Report on Form 10-Q/A that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, as the circumstances that led to the material weakness described above had not yet been identified.
Management performed additional accounting and financial analyses and other post-closing procedures, including consulting with subject matter experts related to the accounting for certain complex equity and equity-linked instruments issued by the Company. The Company's management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control over financial reporting. Specifically, we plan to continue to expand and improve our review process for complex securities and related accounting standards. We also plan to further improve this process by enhancing access to accounting literature and identifying third-party professionals with whom to consult regarding complex accounting applications.
26
PART II - OTHER INFORMATION
Item 1.Legal Proceedings
None.
Item 1A. | Risk Factors |
As of the date of this Quarterly Report on Form 10-Q/A, there have been no material changes to the risk factors disclosed in our Quarterly Report on Form 10-Q filed with the SEC on May 24, 2021. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
The securities in which we invest the funds held in the trust account could bear a negative rate of interest, which could reduce the value of the assets held in trust such that the per-share redemption amount received by public stockholders may be less than $10.00 per share.
The proceeds held in the trust account will be invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations. While short-term U.S. government treasury obligations currently yield a positive rate of interest, they have briefly yielded negative interest rates in recent years. Central banks in Europe and Japan pursued interest rates below zero in recent years, and the Open Market Committee of the Federal Reserve has not ruled out the possibility that it may in the future adopt similar policies in the United States. In the event that we are unable to complete our initial business combination or make certain amendments to our amended and restated memorandum and articles of association, our public stockholders are entitled to receive their pro-rata share of the proceeds held in the trust account, plus any interest income, net of income taxes paid or payable (less, in the case we are unable to complete our initial business combination, $100,000 of interest to pay dissolution expenses). Negative interest rates could reduce the value of the assets held in trust such that the per-share redemption amount received by public stockholders may be less than $10.00 per share.
Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.
On April 12, 2021, the staff of the SEC issued a public statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (‘SPACs’)” (the “SEC Staff Statement”). Specifically, the SEC Staff Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement governing our Warrants. As a result of the SEC Staff Statement, we reevaluated the accounting treatment of our 4,232,686 Public Warrants and 4,155,124 Private Placement Warrants and determined to classify the Warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings.
As a result, included on our condensed balance sheet as of June 30, 2021 contained in these financial statements derivative liabilities related to embedded features contained within our Warrants. Accounting Standards Codification 815, Derivatives and Hedging, provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statements of operations. As a result of the recurring fair value measurement, our consolidated financial statements and results of operations may fluctuate quarterly, based on factors, which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our Warrants each reporting period and that the amount of such gains or losses could be material. The impact of changes in fair value on earnings may have an adverse effect on the market price of our securities.
We have identified a material weakness in our internal control over financial reporting as of June 30, 2021. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
As described elsewhere in this Quarterly Report on Form 10-Q/A, we have identified a material weakness in our internal control over financial reporting related to the Company’s accounting and reporting of complex financial instruments.
27
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis.
Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects.
If we identify any new material weaknesses in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and our stock price may decline as a result. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.
We may face litigation and other risks as a result of the material weakness in our internal control over financial reporting.
As a result of such material weakness, the change in accounting for the Warrants, and other matters raised or that may in the future be raised by the SEC, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the material weaknesses in our internal control over financial reporting and the preparation of our financial statements. As of the date of this Form 10-Q/A, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect on our business, results of operations and financial condition or our ability to complete a business combination.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 4,000,000 Private Placement Warrants to the Sponsor, at a price of $1.50 per Private Placement Warrant, generating gross proceeds of $6.0 million (Note 5). Simultaneously with the closing of the Over-Allotment on March 18, 2021, we consummated the second closing of the Private Placement, resulting in the purchase of an aggregate of an additional 155,124 Private Placement Warrants by the Sponsor, generating gross proceeds to us of approximately $233,000. These issuances were made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
In connection with the Initial Public Offering, our Sponsor had agreed to loan us an aggregate of up to $500,000 pursuant to the Note. This loan was non-interest bearing and payable upon the completion of the Initial Public Offering. The loan was fully repaid with the proceeds from the Initial Public Offering and Private Placement.
Of the gross proceeds received from the Initial Public Offering and the partial exercise of the option to purchase additional Shares, $211,634,330 was placed in the Trust Account. The net proceeds of the Initial Public Offering and certain proceeds from the Private Placement are invested in U.S. government treasury bills with a maturity of 185 days or less and in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations.
We paid a total of approximately $4.2 million in underwriting discounts and commissions related to the Initial Public Offering. In addition, the underwriters agreed to defer $7.4 million in underwriting discounts and commissions.
Item 3. | Defaults upon Senior Securities |
None.
Item 4. | Mine Safety Disclosures. |
Not applicable.
28
Item 5. | Other Information. |
None.
Item 6. | Exhibits. |
Exhibit |
| Description |
3.1 | Amended and Restated Certificate of Incorporation of the Company. (1) | |
31.1* | ||
32.1* | ||
101.INS | Inline XBRL Instance Document | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
(1) | Previously filed as an exhibit to our Current Report on Form 8-K filed on March 12, 2021 and incorporated by reference herein. |
29
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: February 18, 2022 | PWP FORWARD ACQUISITION CORP. I | |
By: | /s/ Stacia Ryan | |
Name: | Stacia Ryan | |
Title: | Chief Executive Officer/Chief Financial Officer |
30